Adding On

By Matt Dixon

Whether they’re called granny flats, in-law suites, or carriage houses, accessory dwelling units (ADUs) are challenging the makeup of modern neighborhoods and city zoning codes alike. ADUs can be attached or detached from a main home but occupy a single lot, increasing density in a neighborhood without changing its character.

One of the primary motivations behind ADU construction is to generate income through a rental apartment. Home owners often see a return on investment in less than a decade, and ADUs can allow tenants and home owners to live affordably in a high-demand neighborhood.

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Other reasons for constructing an ADU include expanding living space to accommodate a family member, downsizing personal living space without giving up valuable real estate, or creating a workspace. This allows them to consolidate expenses while working close to home.

Bob Azar, deputy director of the Providence, Rhode Island, Department of Planning and Development, says allowing ADUs can be a great way to encourage small business and development. His city has seen architects, consultants, and other professionals utilize ADUs to grow their businesses.

Barriers can be substantial

The push for density in urban areas increases the market for and feasibility of ADU development. In many ways, ADUs are a grassroots movement by grassroots developers. The vast majority of these builders are average home owners looking to even out their living expenses. Unlike development firms, however, home owners-turned-small developers are faced with many barriers to entry. For example, fees of as much as $20,000 can prevent home owners from even beginning the ADU construction process.

Barriers of ADU Development1,2

Not allowed by right

ADU development is unpredictable when home owners need special variances.

These rules promote vehicle traffic and loss of green space, while having a minimal impact on parking problems.

Onsite owner occupancy requirement

This rule may restrict flexibility of use.

Extreme permit fees

Permit fees can be a large portion of overall cost and can hinder ADU construction.

Discrepancies in appraisals

Appraisers assume ADUs are a financial liability if not rented and assign them a low value.

Financing

Programs catering to ADUs are very rare.

Education

Many people do not know what ADUs are, let alone their complex regulations.

Growing acceptance

Some cities are making it easier for home owners to build an ADU. Originally, Washington, D.C., residents in certain residential areas could build a small apartment for a live-in nanny or maid, but needed special permission. Rising costs of living in the city caused many residents to seek other means of income, and some groups lobbied for the expansion of ADU development. Since 2016, D.C. has allowed ADUs by right in all residential neighborhoods, stripping the lengthy permit process and outdated regulations.

After Portland, Oregon, waived impact fees for ADU construction in 2010, the number of permits issued in the city skyrocketed; there are an estimated 1,900 new ADUs in the city. Portland allows all types of ADUs, which can be a compact detached home on a foundation, a basement apartment with a separate entrance, or even a living space above a garage.

Like Washington, D.C., Denver has only recently lifted a long ban on new ADU construction. Historic neighborhoods, such as Curtis Park, prohibit teardowns and pop-ups (adding additional floors), so many home owners build structures along alleys to increase density and profits.

ADUs are important components of the evolving real estate and development climate. As the world moves toward increased urbanization, it is important to create affordable housing options and expand housing stock. Achievable standards and streamlined permitting and processing, while keeping the character of an existing neighborhood in mind, are key components when advocating for an ADU. Fostering diverse housing stock and unique neighborhoods often stir benefits to many parties.